The Real Problem With Funding the Government

April 7, 2011 - by Donny Shaw

After meeting late Wednesday night with House Speaker John Boehner [R, OH-8], Senate Majority Leader Harry Reid [D, NV] took to the floor this morning and said that agreeing on a topline budget number isn’t the thing blocking a deal on preventing a government shutdown Friday night, it’s social policy. “Our differences are no longer over the savings we get on government spending, Reid said. “The only thing holding up an agreement is ideology.”

When the House passed the budget bill, the Republican majority added an unprecedented number of policy riders to it, touching on just about every major political issue you can think of. While budgets always affect social policy, decisions on which programs to cut and which to fund should be made in the regular appropriations process that allows for committee review and public input. Of course, the Democrats failed to complete the appropriations process last year when they controlled Congress, and that’s why we now have to do the budget through a continuing resolution. But that doesn’t justify the Republicans bypassing congressional deliberation and public review now.

For a taste of the policy riders that are currently in the budget bill and preventing the Democrats and Republicans from reaching a deal, I’ve highlighted a dozen or so below. Links go to the actual legislative text of the riders.

Comments

If we can’t afford it…we can’t afford it. That being said, We need to stop funding an organization that we pioneered that now dislikes us…The UN. Especially, and after Obama redirected what NASA does saying he wants them to study Climate change, and NASA has recently said that the famed theory of Global Warming being a result of terrestrail beings, is bunk! Planned parenthood is better suited as done by NPO’s and individual community work. The FCC is a draconian agency that actually should be almost completely dismantled. U.S> Constitution forbids the government from having any power over the internet, especially since it is a global network. The EPA has gone around Congress and behind the backs of this country to impliment regulation on greenhouse gasses that congress voted down laws year. Draconian and illegal. Cut that funding for sure. Cap and Trade was voted down. I could go on and on but I will not…I hope you get the picture. Sorry. GOP is right on this one.

If you don’t have money in your bank account you just don’t spend money. It’s that simple. The Government does not have money in the bank so we just don’t spend it. I would go to jail if I handled money the way the Government does. so we just can’t spend what we don’t have. It realy is that simple!

We have a budget deficit because the government spends too much money plain and simple.

From the foundation of our country up until the day Obama got elected we overspent 10 trillion dollars which is inexcusable. But Obama’s administration has been the worst of all previous administrations. While it took a little over 200 years to spend us into a 10 trillion dollar deficit, Obama has managed to spend nearly nearly 5 trillion more dollars in deficit spending in just 2 years! Don’t tell me that it is because the rich don’t pay taxes.

And in a day when we face terrorist threats from every border you suggest we should cut our military funding? The government’s job is to protect the American people from foreign threats not to be our nanny.

1. Invest in the military.
2. Cut spending.
3. Create jobs by cutting taxes.
4. Let the free market drive the economy.
That is the formula for getting us out of this crisis.

Please do some research before you make such a ridiculous statement. The top 1% of income earners (those making $380,354 or higher) paid 38.02% of all taxes in 2008. That’s nearly double the tax income for which they were responsible in 1980 when they accounted for 19.08% of all tax income. The top marginal tax rate in 1980 was double today’s 35%.

What about the 51% of Americans who pay no taxes? The ones who extract more from the system than they put in? Get off of the economic class warfare bandwagon and realize that the only class warfare that truly exists in this country is between the politically connected and the rest of us.

The problem isn’t the tax system, the problem is spending. Read Bastiat’s “The Law” and “Economic Sophisms”, Hayek’s “Road to Serfdom”, and Spencer’s “Social Statics”. All of them point out the fallacious nature of both government redistribution of wealth and empire building. The high minded, well intended programs created over the last century are rife with unintended consequences. When those unintended consequences come to light, the solution is not termination of the original plan, it is another plan with its own issues.

When will the People (I capitalized that on purpose) wake up and realize that the government has spent the last century usurping individual liberty in the name of social justice.

I don’t buy into the Austrian/Neo Classical economic religions. Their economic “theories”(and I use the term loosely in this case) ignore all of the developments and understanding we have accumulated over the last 80 years or so, typically they follow closer to a ideology of anarchy, racism(in the case of Von mises), and “self evident axioms”.

The theories we have now still have holes in them large enough to drive trains through, but they are much closer to reality to any of the nonsense pushed by Hayek.

In all cases with economic “theory” more often that not it is all designed to prop up the ideological belief of how one wishes or thinks the world should work rather then in fact a serious study of how in fact it does work.

“What about the 51% of Americans who pay no taxes? The ones who extract more from the system than they put in?”

The median wage in 1980 was $47,000 dollars and the average wage was $12,000 dollars, The median wage today is $39,000 dollars and the average wage is $35,000 dollars.

Remember to add 30 years of inflation, after you come to the realisation that that real wages are under half of what they where in 1980 perhaps you can understand that 51% didn’t pay(income taxes they are still revenue positive due to payroll taxes which are capped at $107,000 dollars of income) because really they are much closer to the poverty level then you would like to admit(or hell I don’t know anyone that would want to admit to that).

You’re getting closer to realizing the real truth – the Fed, by incessantly printing money and screwing around with interest rates devalues the dollar constantly. The biggest battle right now monetarily is to see if you can keep up with the devaluation of the dollar. $12000 in 1980 adjusted for inflation is $36000 in 2009. You see the symptom, yet fail to recognize the cause.

Over the last 80 years, the only economic knowledge we have accumulated is that the Keynesian model is a glaring failure.

Based on your posts on this site, I would argue that you are not lacking in intelligence, only information. Please read the actual works referenced above (it appears that your opinion is colored by someone else’s analysis). If one believes that a government that consumes 25% of the GDP is necessary, then economic theories based on the free market will seem like anarchy.

To be clear the Fed hasn’t printed a lot of money, this is an illusion coming from a misunderstanding of how the fractional reserve system works.

Nominally, their are two different ways money can enter the economy, via creation of new money(the way you point out), and via federal reserve discount window where a bank can barrow money up to the accepted leverage ratio allowed to banks(currently 15:1).

The Voodoo economics of Reagan, and the supply side bankruptcy have been the basis of our economic policy for the last 30 years or so, not Keynesian theory(and really this is an evolving theory it is not the same as it was).

It is not a misunderstanding, it is seeing the fractional reserve system for what it is. Creating money out of thin air and thereby decreasing the real value of the existing money in the system.

Fractional reserve banking is predicated thoroughly on the bank being allowed to extend more credit than it has cash on hand – that is creating money out of thin air.

A real money system, not based on fiat currency, is the only way to eliminate the death spiral that our current system is in. As for Reagan’s use of the Laffer curve (what you choose to call Voodoo) was at least an honest attempt to spur the economy into creating jobs. The last two administrations (W and O) have done everything in their power to stifle the economy while pretending that they are doing otherwise – that is voodoo….

I doesn’t just refer to tax rates, it refers to the idea of making money “cheap”, using outsourcing to reduce costs(aka undermine the wages of people who buy things), undermining regulation especially in the area’s of banking and money.

The overall idea that supply of anything creates its own demand, that is “Voodoo” economics.

And I don’t want to make it sound like I support Keynesian theory, It has been used to justify some pretty major stupidity.

But its models for how capital move around an economy, CVT, the velocity of capital, etc all seem to be very correct.

What those things are used to justify, the bailouts and such, while they worked to some extent(they did stop the freefall), they haven’t actually reversed the feedback loop of shrinking deposit levels at the banks damaging their lending capacities(tho this does seem to be closing itself over time by itself).

Thank heavens we have plenty of Credit Unions and community banks that didn’t further inflate the stupidity going on in wall-street.

I wouldn’t say the bailouts stopped the “freefall” because had we not done a bailout, the freefall would’ve stopped much sooner, although it would’ve been much worse. At least it wouldn’t have been dragged out so darn long.

When I talk about bailouts I include the $23 trillion dollars spent by the Fed in 2007, TARP, Use of fannie and freddi to hide market failures(rule changes in this organizations by the Bush administration in 2007 forced them to buy a lot of junk mortgage bonds).

The depth of the crisis is completely misunderstood, It would have dragged out much much longer, Remember the last great depression wasn’t pulled out until the government engaged in the largest spending spree ever engaged in ever(World War 2). Right along with the highest tax rates ever( 96% on highest bracket ).

We are actually headed towards deflation currently as a result of the contraction of leverage ratio’s and deposits at the banks, The fed is currently using QE2, QE3, zero % interest etc to try and hold back deflation(seems to be working so far).

Remember that due to the leveraging of the banks ever dollar lost in deposits is $15-$30 dollars removed from the lending economy, Now this ratio is shrinking and it should nominally this would be somewhat tied to the leverage ratio required on the banks, but they are still coming back from the idiocy of the 1999 banking deregulation that removed those requirements allowed banks to leverage infinite:1(in theory, 35-45:1 in most cases).

The 0% rate has been explicitly set to slow and eventually stop the feedback of loses in deposits at the banks, again it seems to be working, lending is starting to trend back up again, and once most of the banks deposit rates have stabilized they should be able to start pushing that rate back up to counter act the inflationary effect of a low rate(or 0% rate).

-A look on NASA’s website shows that they believe global warming is anthropogenic.

-Defunding Planned Parenthood does not mean that private groups will immediately replace it. But I guess it would be a funding cut, so I’m fine with it (even if I disagree politically).

-The FCC rider doesn’t cut their funding, it just prevents them from implementing certain rules. And what’s this about the Constitution? I don’t think it mentions the internet (you couldn’t have thought that, either).

-EPA rider: The Supreme Court told EPA that CO2 is a pollutant and gave them the right to regulate (or not). You also said we should “cut that funding,” but it doesn’t really exist. All that exists so far is reporting requirements.

Besides, this is a budget bill, some of these riders can be discussed later.

If you had read and understood the Constitution at some point in the past you would know that failure to mention something means that the federal government cannot regulate it. The Constitution defines limited powers for a federal government; everything else is left to the states and the people. And yes, before you ask, this does mean that the vast majority of federal government activities are blatantly illegal.

I for one hope the government stays shut down until it obeys its own laws.

nmeagent, just as a heads up, the first part of your first sentence is fairly rude. Let’s be cool.

That aside, I bet you could make an argument with the Commerce Clause. Since the original blog post is about the budget bill and the social policy riders in it, I won’t continue a “Constitution argument.” I have a feeling I could never change your mind.

Also, since not that many of the people in power agree with you that most of the federal government is illegal, a shutdown won’t change their minds. It will just make things more expensive, really.

Sorry, it’s not personal. There is a great deal of ignorance wrt. the Constitution floating around out there and I’ve just about run out of patience. In my opinion the belief that the federal government is a general government (i.e. only limited where explicitly mentioned) is almost entirely responsible for its growth into the all-encompassing monster that it is today and may contribute to the eventual death of liberty (as we know it). If the federal government may regulate anything and everything not explicitly mentioned in its founding document (despite the fact that the 9th and 10th amendments of that document specifically say otherwise), then there are no realistic limits on its power. Given time and will, even natural rights supposedly protected by the Bill of Rights aren’t safe.

Though it may seem like a minor issue, insinuating that Congress may regulate the internet just because it is not mentioned in the Constitution basically flies in the face of defining characteristic of our particular flavor of federalism. I’m not saying this is exactly what you were getting at, but one of your statements was close enough that I thought I’d chime in.

Well said, and the “living document” belief, on top of what’s already been mentioned, means that the evil forces of tyranny will have constitutional authority to take away all our liberties, given enough time that is. Absolute power corrupts absolutely.

We need to cut spending. Not just 61 Billion. We need to cut trillions. Everyone is going to get hit for the Debt is so great this is what it is going to take to get us on track to balancing the Budget. This is the Dems mess and now the Repubs. are trying to clean up there mess and they the Dems don’t want to get serious and do some very serious cutting. All they know is to spend. We are taking the blank check from them and they are having a temper tantrim. Dems need to grow up and man up and face this problem that they have made 4 times worse and come with some solid and workable solutions instead of blaming Bush and the Repubs. They had several months to come up with a Budget but declined becasue of the election of 2010. Thats not what they are saying but thats the real reason they did not pass the Budget last year. This is there Conressional Duty under the Congressional law. Wait for the big battle when they have to take on the 2012 Budget. Won’t that be fun.

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